Israel is open to a temporary settlement freeze, but is demanding a conciliatory gesture from the Palestinians or the Arab states so Mr. Netanyahu can deflect political criticism from supporters already upset at his recent endorsement of a Palestinian state. An advisor to Netanyahu said the settlement issue is secondary and both sides want to put the dispute behind them.

"Even if the matter of a temporary freeze comes up, it can't be a unique or an isolated issue," says Zalman Shoval, a former Israeli ambassador to the US and foreign policy aide to Netanyahu. "In every quid pro quo there has to be a quo. Israel will want to hear what we can expect from the other side."

A joint statement released after the meeting named the formula for promoting "regional peace" between Israel and its Arab neighbors: Israel must lift blockades in the West Bank and "act" to curb settlement activity, while the Palestinians must boost security and the Arab states move toward normalization of ties with Israel.

Mr. Mitchell is expected to visit the region in the coming weeks for talks with Netanyahu.

In recent weeks, Israel has tried to parry favor with the US by lifting restrictions on Palestinian movement around the West Bank, but it hasn't alleviated pressure on the settlement issue.

"It's my sense that the US is not letting up," says Yossi Alpher, the coeditor of Israeli-Palestinian online opinion journal Bitterlemons.org. "The pressure has got the Netanyahu government squirming, bargaining for a way out," he said, adding that he sees signs of Israel backing down.

Mr. Alpher said that if the US is able to convince its Arab allies to make a normalization gesture to Israel as a quid pro quo, it could help Netanyahu present the talks as a diplomatic victory even before the start of peace talks.

Indeed, Netanyahu is coming under increasing criticism at home over the peace process. Israeli Television Channel 2 news reported that the prime minister is facing a group of about 12 lawmakers from within his own party who have signed a letter against his endorsement of a two-state solution.

The focus on the settlement issue is helping the US to recast itself as a more neutral broker in the Israeli-Palestinian peace process, said one former Israeli diplomat. But the elusiveness of a deal on settlements could be a preview of the difficulties that are likely to arise if the sides ever resume peace negotiations.

"The talks with Mitchell look to me like technical talks," says Alon Liel, a former director general of the Israeli Foreign ministry. "They don't look to me as talks on the implementation of the Obama vision of two states. This is only beginning of the beginning."